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HMRC internal manual

Self Assessment Claims Manual

Overpayment relief: Equitable liability replaced by special relief

Before 1 April 2011, where people had no statutory remedy to adjust an excessive assessment or displace a determination because the time limit for submitting a return had passed, HMRC would, in some cases, be prepared not to pursue their legal right to recover the full amount due. This practice was known as equitable liability and was explained in Tax Bulletin 18 (August 1995).

HMRC were only prepared to consider applying equitable liability where

  • it was clearly demonstrated that the liability assessed or determined was greater than the amount that would have been charged had the returns, and necessary supporting documentation, been submitted at the proper time, and
  • acceptable evidence was provided of what the correct liability should have been.

In such cases HMRC would accept a reduced sum based on the evidence provided if, in their view, it would be unconscionable to pursue recovery of the full amount.

This concessionary treatment depended on the circumstances of the particular case, and was conditional on the taxpayer’s affairs being brought fully up to date before the claim would be considered. The taxpayer was expected to pay the reduced sum in full. Cases were dealt with at HMRC’s Enforcement Offices in Worthing and Belfast and in Enforcement Section in Edinburgh.

From 1 April 2011, equitable liability is replaced by a new, statutory, special relief, see SACM12215+. As a result, HMRC no longer accepts new requests for equitable liability but still continues to consider those claims for equitable liability received before that date.

People will still be able to make a late appeal against an amendment or assessment if they have a reasonable excuse for not having appealed within time - see ARTG2240, ARTG2250 or, if they apply to the tribunal, see ARTG8240.

There is no right of appeal against an HMRC determination where a person has not submitted a self-assessment return - see SAM50030. Instead, people who disagree with the determination should displace it by submitting a self-assessment return. From 1 April 2011, people who are out of time to make a self-assessment to displace a determination and are unable to claim overpayment relief may be able to claim special relief - see SACM12215 onwards.